"We're Going to Have to Fight for It;" Only Two Candidates on the Trail; Why Romney Isn't Gaining on Gingrich; NTSB: Ban Phones For Drivers; FCC: No More Loud Commercials; Tony Blinken Interview; Terrorists Expose CIA Officers?

Aired December 13, 2011 - 17:00 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

WOLF BLITZER, HOST, CNN'S THE SITUATION ROOM: And to our viewers, you're in THE SITUATION ROOM.

Happening now, President Obama plays the underdog. He's telling supporters his reelection is not a slam dunk. We have a new inside look at his campaign strategy.

Also, Mitt Romney's struggle to stop the Gingrich bandwagon. He has some big hurdles and not much time to turn things around in Iowa.

And an angry new warning from a top official in Iraq that President Obama is leaving the hand country in the hands of a dictator. This hour, growing fears about the U.S. withdrawal and the way Nouri al-Maliki, the prime minister, is running the country.

We want to welcome our viewers in the United States and around the world. Breaking news, political headlines and Jeanne Moos all straight ahead.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

The first Republican presidential contest exactly three weeks from today. And the Obama camp is banking on a long, bitter slug fest between Newt Gingrich and Mitt Romney. The president is ramping up his own campaign right now, with Democrats going on the attack against both Republican frontrunners.

Our White House correspondent, Dan Lothian, is standing by -- and, Dan, let's get some more on Team Obama's strategy.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Well, first of all, they have a battle plan that divides the country up into what they believe are winnable regions. They're also going hard after the leading GOP contenders. President Obama today, speaking to supporters, made it clear that a lot is at stake. He believes that 2012 may be even more important than 2008.

But as he struggles to turn the economy around, he faces a lot of skepticism.

(BEGIN VIDEOTAPE) LOTHIAN (voice-over): With Americans still struggling to find jobs, pay bills and stay in their homes, President Obama played the underdog card as he appealed to supporters at a campaign event in Washington.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We're going to have to fight for it. It's not a slam dunk.

LOTHIAN: His poll numbers are down and Republicans say he's vulnerable.

RUDOLPH GIULIANI (R), FORMER PRESIDENTIAL CANDIDATE: It's going to really be almost disaster time for him. So I believe the White House, although they're not going to say this, is feeling -- I'm not going to call it panic, but they're feeling a certain kind of anxiety about this.

LOTHIAN: He's right. The campaign isn't showing signs of stress. Instead, Team Obama is continuing its attacks on Republican presidential hopeful, Mitt Romney, and now turning up the heat on new frontrunner, Newt Gingrich.

In a briefing with political reporters, campaign strategist David Axelrod compared the former House speaker to, well, the rear end of a monkey. Repeating a story that he described as homespun wisdom, Axelrod said: "Just remember, the higher a monkey climbs a pole, the more you can see his butt." Then he added: "The speaker is very high on the pole right now and we'll see how people like the view."

Despite the challenges he's facing in 2012, the president remains optimistic that voters will give him a second term.

OBAMA: We are going to win this thing. We are going to win this thing and America is going to win as a consequence, all right?

LOTHIAN: The Obama strategy to victory centers on five key paths, from winning Colorado, New Mexico and Nevada in the West, to the huge battleground prize, Florida; locking in a Southern path of North Carolina and Virginia; getting Midwest victories in Ohio and Iowa; and finally, snatching Arizona from the GOP.

His campaign advisers predict they'll be helped by an extended Republican primary battle that would result in a weakened GOP nominee and that the drawn out process could drain the Republicans of much needed cash.

(END VIDEO TAPE)

LOTHIAN: Now the Obama campaign is also touting another advantage, that they have more staffers on the ground in Iowa than any other campaign and that they have more infrastructure on the ground in all of the key states. But again, Wolf, as we've been talking about, the economy remains a big issue. A lot of people still unhappy. Things could still turn around. But that may be the only factor come election day. BLITZER: And we'll see some more campaigning, I -- I assume, in the days and weeks to come, by the president, even though he doesn't have any Democratic challenger.

LOTHIAN: That's right. The president going out there campaigning, doing fundraising, as well. And in all of these events, Wolf, always making it very clear that he understands the frustration of the American voters out there, that it will take time to turn things around. But a lot of Americans are getting impatient.

BLITZER: Dan Lothian is at the White House. Thank you.

You might think the candidates would be flooding Iowa right now, with the caucuses just around the corner.

But guess what?

Only one candidate, Rick Santorum, is in the state right now. In fact, he's one of only two candidates who have scheduled public appearances today. Ron Paul is in New Hampshire.

So what are the other Republican contenders doing?

Let's talk about the state of the race with our chief national correspondent, John King.

He's in Iowa, anchoring "John King USA" all week.

All of a sudden, none of the candidates are there, John, except for Rick Santorum.

What's going on here?

JOHN KING, HOST, "JOHN KING USA": Only Rick Santorum today, Wolf. Michelle Bachmann will be in the state tomorrow. Governor Rick Perry coming into the state tomorrow. All of the Republicans will be here by the end of the week. There's a debate Thursday night in this state. So the candidates will be coming here.

But imagine that, Iowa votes three weeks from tonight. Twenty- one days from today, the presidential campaign kicks of in earnest, the first official votes. And yet there's only one candidate in this state.

And that's starting a conversation not only about the candidates, but about the future of the Iowa caucuses, about how this campaign year is so different.

Look at the front of the "Cedar Rapids Gazette" -- "Iowa Caucuses Still First, But No Longer Foremost," with a question mark.

Now why is that?

Normally, you have the retail politics here. Rick Santorum, for example, has gone to all 99 counties. That's something that candidates like to brag about when they run a long caucus campaign.

But you have Gingrich, who's been here about 50 days; Romney, who's only been here 10 or 12 days. They're the leaders in the polls here.

Why?

Because the debates have had so much of a dramatic influence this year. Normally, you see national polls and then Iowa polls are a little different. The Iowa polls track the national polls.

So there are some people in this state who have a bit of a concern, saying the caucuses are perhaps losing a bit of their character, in part, because of the technological changes that all campaigns have -- organizing on the Internet, more use of television ads and Web videos, but especially the huge influence the debates have had this year, have some people in this state conceding, Wolf, it's very different this time around.

BLITZER: I wrote a blog post today, John, saying that Ron Paul could surprise a lot of us. He's got a fabulous organization in Iowa. He's got a lot of volunteers. They're passionate. He could certainly bring out a lot of caucus goers.

KING: He certainly can. There are some people who think he has an outside shot of winning Iowa. Most veteran activists here tell you probably not. But remember, this has been a very unpredictable and very volatile year for the Republicans. So don't count that out. Without a doubt, Ron Paul will be a huge factor here in Iowa. Right now, he's second in the polls or third in the polls, tied, essentially, with Mitt Romney in the latest poll; Speaker Gingrich at 22; Romney and Paul both at 17 percent.

As you noted, his support is certain. It's a very dedicated group of people. There's a libertarian base, also college students. They organize using the Internet quite well. And so there's no question -- no question Ron Paul will be an impact player here in Iowa.

The question is, can he possibly win or how high up can he go?

And if Ron Paul, for example, runs a strong second, what impact does that have?

Iowa always has these two effects. Number one, it usually knocks at least one, sometimes two, candidates from the race. That could be Bachmann and Santorum, although Senator Santorum told me today he thinks a surprise is going to happen here.

Number two, you see the New Hampshire polls now and the South Carolina polls now, but the day after Iowa, those polls always, always get reshuffled -- Wolf.

BLITZER: John is reporting all week this week from Iowa.

Watch "John King USA," for our North American viewers, at the top of the hour.

Let's drill down a little bit deeper right now on Mitt Romney, with his loss of support just weeks before Republicans actually start caucusing and voting.

Our chief political analyst, Gloria Borger, is here -- Gloria, why is Mitt Romney having so much trouble increasing his sort of static support?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, we took a look at our recent polls from early states. And we took specifically a look at Tea Party support for Mitt Romney. They haven't been his largest constituency, but they're a very important constituency in the Republican Party.

So take a look at these numbers in the early states of New Hampshire, South Carolina and Florida. You see from October to early December in New Hampshire, Romney down 14; South Carolina, down 9; Florida, down 8 points. So these voters have flocked to Gingrich. So the basic story line, Wolf, that Republican conservatives don't love Mitt Romney, still remains.

But the Tea Partiers are saying, you know what, if the establishment hates Newt Gingrich, that may actually be a good thing. And that may be attracting them to Newt Gingrich. Also, he's a known quantity. He's got good name recognition. And they're giving him a second look. And he's behaving well. He's been a smooth campaigner. He's been positive. He says he's going to remain relentlessly positive. And they like that.

BLITZER: Newt Gingrich is on top all the polls in Iowa.

What's Mitt -- Mitt Romney's problem there?

BORGER: Well, he has problems with the conservative caucus goers, as we were saying. But it's more than that. It has to do with who he is as a person. And "The Washington Post"/ABC Poll recently asked, "Who do you see as honest and trustworthy?"

And you see, again, Ron Paul. You were just talking about a Ron Paul surge, 23 percent; Bachmann, 17; Gingrich and Romney down there with 13 percent and 12 percent.

Again, this is the Iowa Republican Party, which is very different from the Republican Party anywhere else in the country. But it does tell you that Mitt Romney's perceived flip-flopping on the issues hurts him. On the issues, Newt Gingrich does better.

I will say, though, Wolf, that right now, the pressure is on Newt Gingrich. There are very high expectations for him in Iowa. And I would argue that he has to win Iowa if he's going to get the nomination, because never in history has a Republican candidate gotten the nomination if he didn't win either Iowa or New Hampshire. And Romney is very much favored in New Hampshire so.

BLITZER: If Ron Paul were to win Iowa, that would shake things up going into New Hampshire.

BORGER: Or it could freeze the race.

BLITZER: Yes. We'll see what happens.

BORGER: You know, it could absolutely freeze it.

BLITZER: Gloria, thank you.

BORGER: Sure.

BLITZER: The Republican presidential candidate, Ron Paul, by the way, will be my guest tomorrow here in THE SITUATION ROOM.

We'll discuss what's going on a lot of these issues.

Also coming up, 38,000 people lost their savings because of one company on Wall Street.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Situations like what happened at MF Global threaten that success. Our farmers and ranchers have lost trust in the system. They believed that there were safeguards in place to protect their money in exactly situations like this.

(END VIDEO CLIP)

BLITZER: They're bringing their heartbreak, stories and their deep anger to Congress, saying millions of dollars missing from MF Global has been stolen.

JACK CAFFERTY, CNN CORRESPONDENT: Fear of big government is close to record highs here in the United States. According to a new Gallup Poll, 64 percent of those surveyed say that big government is the biggest threat to this country. That's one point off the all time high. Compare that with just 26 percent, who are most worried about big business, and only 8 percent who say the biggest threat comes from big labor. Americans have always been more concerned about big government than about big business or big labor since this question was first asked way back in 1965.

But what's interesting here is that Democrats actually lead the increase in concerns about big government. This during the term of a Democratic president, Barack Obama.

Almost half of Democrats now say that big government is the biggest threat to the United States. That's up significantly from two years ago. And more significantly, it's higher than the number of Democrats who worry about big business. These poll numbers suggest that the Occupy Wall Street movement isn't catching on.

Despite the movement's targeting of corporate America, most Americans don't view big business as the greatest threat to the country. It's their government. In fact, the public's concerns about big business are down since 2009. Worries about big business peaked in 2002 after the scandals at Enron and Worldcom. But what the American people are worried about is big government and the role it plays in their daily lives, a government that has only gotten bigger under a president who is now running for a second term.

Here's the question. What do you fear most, big government, big business, big labor? Go to CNN.com/caffertyfile, post a comment on my blog or go to our post on the SITUATION ROOM's Facebook page -- Wolf.

WOLF BLITZER, CNN ANCHOR: Good question, Jack. Thank you.

A new attempt today by members of Congress to hold former senator, former governor, Jon Corzine, accountable for more than a billion dollars now missing. This time, lawmakers heard from customers of Corzine's failed brokerage firm, MF Global, and they had horror stories to share with all of us.

Lisa Sylvester has been following this story, really, from day one. MF Global, it's been a fiasco. What happened today here in Washington?

LISA SYLVESTER, CNN CORRESPONDENT: Well, Wolf, these were everyday folks who are impacted by MF Global's collapse, particularly, farmers who use the brokerage firm among other things to park money there until they needed it to buy seed for planting season.

When they put their money there, they weren't investing it or loaning it, it was like putting money in a bank account, and they thought that money was untouchable.

(BEGIN VIDEOTAPE)

SEN. DEBBIE STABENOW, (D) AGRICULTURE CHAIRWOMAN: The truth, the whole truth, and nothing but the truth so help you God.

SYLVESTER (voice-over): Dean Tofteland bought a new suit to come to Washington. He's a hog farmer from Minnesota, more accustomed to getting his hands dirty in the fields --

STABENOW: Mr. Tofteland, welcome.

SYLVESTER: -- instead of hanging around Congress. But he's here testifying how MF Global's downfall has cost him big money.

SYLVESTER: Tofteland had about $250,000 with MF Global. $200,000 of that money is still missing. Part of about $1.2 billion in customer funds that are unaccounted for. Senators on the agriculture committee hammered the top three executives at the now bankrupt, MF Global, including former CEO and former senator, Jon Corzine.

SEN. PAT ROBERTS, (R) KANSAS: Funds doing simply disappear. Someone took action, whether legal or illegal to move that money. And the effect of that decision is being felt across the countryside.

SYLVESTER: For the 38,000 MF Global customers who want answers, they never came.

STABENOW: Mr. Steenkamp as CFO, Where's the money?

HENRI STEENKAMP, CFO, MF GLOBAL: Senator, unfortunately, I do not know where the money is.

STABENOW: Well, who does?

STEENKAMP: Well, senator, I wasn't -- part of my job was not to approve transfers of client funds.

STABENOW: Mr. Abelow, where's the money?

BRADLEY ABELOW, PRES./COO, MF GLOBAL: Senator, as I said in my statement, I do not know where the money is.

JON CORZINE, FORMER CEO OF MF GLOBAL: It's clear that something was amiss, and that needs to be discovered what that was.

SYLVESTER: All three MF Global executives said they did not knowingly OK the use of customer funds.

CORZINE: I never directed anyone at MF Global to misuse customer funds. I never intended to, and as far as I'm concerned, I never gave instructions that anybody could misconstrue.

SYLVESTER: Those answers were not satisfactory to MF Global's customers like David Rosen, who had about $150,000 with MF Global. He says the buck stops with Corzine.

DAVID ROSEN, ROSE TRADING: I would say that if he broke the law, he deserves to go to jail.

SYLVESTER: And farmer, Dean Tofteland, fears this could have a ripple effect throughout the farming community.

TOFTELAND: There's also a lot of people, mom and pops, out there that probably have their whole life savings tied up and lost and tied up here. So, it's important to realize -- important to realize this affects a lot more people across the whole country.

(END VIDEOTAPE)

SYLVESTER (on-camera): And this isn't done yet, not by a long shot. There's another hearing on Thursday, the House Financial Services Committee, and again, Corzine will be asked the same question, where's the money? And also, the question, what happened here, Wolf? BLITZER: I don't understand why it's so hard to figure out if it's $1.2 billion or more than a billion dollars missing. Somebody must have authorized that money going from that so-called segregated account out to some place else. Can't they just review that and find out? Our big law enforcement is doing that.

SYLVESTER: That is the $1.2 billion question in this case. And it came up repeatedly in this hearing, because it's been six weeks since this money turned up missing, and people are saying, in six weeks, you still can't figure out. You still can't go back and try to unravel. There is a trustee that's looking in to trying to get to the bottom of this.

And as you mentioned, the FBI, there is a criminal investigation going on right now. So, hopefully, somebody will come up with answers.

BLITZER: All right. Thanks for covering the story for us. Heartbreaking stories, indeed. Thank you.

Here's a question, did President Obama make a tactical error when he showed so much support for the Iraqi Prime Minister? The scathing reviews are coming in, and they're coming in from Iraqis. Arwa Damon standing by to join us from Baghdad.

And TV viewers have been complaining for years. The commercials are so much louder than the programs. Now, it could be coming to an end. We'll tell you what's going on. Stay with us. You're in the SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Lisa Sylvester is monitoring some of the other top stories in the SITUATION ROOM right now, including a push by the federal government to potentially ban cell phone use in cars. What's going on.

SYLVESTER: Yes. The story creating a lot of buzz. Phone calls and texts could be a thing of the past for drivers if the National Transportation Safety Board has its way. The five-member board unanimously recommended that states ban calls and texting except in emergencies. This includes hands-free and hand-held devices. The board lacks the power to impose restrictions, but its judgments carry weight with lawmakers. The NTSB cited several deadly accidents as its reason behind its decision.

And if you are tired of high-volume commercials, the government has heard you loud and clear. A new federal rule will prohibit commercials played much louder than television shows. The Federal Communication Commission imposed the rule after thousands of viewer complaints. The rule limiting spikes and volume is not going to take effect for another year. So, you might have to keep your finger on the mute button for just a little while longer.

And the U.S. government says it will save about $50 million every year by not doing something. That is a treasury won't mint any more dollar coins because it already has a decade's worth of extra coins on the shelves. The excess came from a series of coins made to honor deceased presidents.

More than 40 percent of those coins were returned to the Federal Reserve because no one wanted them. The mint will still make enough coins to satisfy collectors.

And Donald Trump, yes, he is out of the debate business for now. In the statement, Trump said, quote, "The Republican Party candidates are very concerned that sometime after the final episode of the "Apprentice," I will announce my candidacy for president of the United States as an independent, and that, unless, I conclusively agree not to run as an independent, they will not agree to attend or to be part of the Newsmax debate."

So, Trump says, to avoid a conflict of interest in the Republican Party, he is dropping out of the debate. Only two candidates, though, Rick Santorum and Newt Gingrich, signed up, Wolf.

BLITZER: Maybe they'll have a little Lincoln/Douglass-style debate between the two of them without a moderate.

SYLVESTER: Yes. That's the big question is if this is still going to go on, and we have not heard back from Newsmax if the debate will proceed or not.

BLITZER: I like the "Washington Post" headline, Donald Trump fires himself as debate moderator. Did you see that?

SYLVESTER: I like that.

BLITZER: Thank you.

A high-level CIA operation in the Middle East may be compromised. It's a new offensive in the spy war. Standby for details.

And a top official says President Obama will some day learn that he was deceived, deceived by the Iraqi Prime Minister, and he will regret it. Standby for that.

(COMMERCIAL BREAK)

BLITZER: It's a stunning condemnation of the Iraqi Prime Minister, Nouri al-Maliki, from his own deputy. He not only calls Nouri al-Maliki a dictator, he accuses him of deceiving President Obama in a way that is leaving Iraq divided and in chaos. The interview underscores so many people's worst fears about the future of Iraq, including my own fears once U.S. troops leave at the end of the month.

CNN's Arwa Damon is joining us now from Baghdad. Her in-depth interview with the Iraqi deputy Prime Minister is already causing lots of waves. Arwa, why does he feel so strongly and negatively about Nouri al-Maliki?

ARWA DAMON, CNN INTERNATIONAL CORRESPONDENT: Well, Wolf, it's quite simple. Saleh al-Mutlaq, one of Nouri al-Maliki's deputy prime ministers, a Sunni, feels as if he has absolutely no power. He says that al-Maliki is consolidating power, refusing to partake in a power- sharing government. Just take a listen to what he said to us a bit earlier today.

(BEGIN VIDEO CLIP)

DAMON: What kind of an Iraq do you think the United States is leaving behind?

SALEH AL-MUTLAQ, IRAQI DEPUTY PRIME MINISTER: America left Iraq with almost no infrastructure. The political oppressors (ph) is very wrong direction. It's going towards a dictatorship. It is a one- party show and one-man show. Yes, al-Maliki is the worst dictator we have ever seen in our history.

DAMON: How much influence does Iran have in Iraq right now? And what sort of power or control do they have over al-Maliki's actions?

AL-MUTLAQ: Without Iran's influence, the shape of the government now would not be as it is. The whole set of the government, from the president to the prime minister, was the decision of Iran. Iran wants Iraq to be the base to expand.

DAMON: President Obama introduced Prime Minister Nouri al-Maliki as being the leader of a democratic nation. He also stated that the government is currently more inclusive than it has ever been.

What was your reaction to that?

AL-MUTLAQ: I was really shocked when I heard the speech of Obama at that conference. It's either because they don't know anything in Iraq, they don't know what's happening in Iraq, or because they don't' want to admit the reality in Iraq, the failure in Iraq.

Al-Maliki is playing a game between Iran and the United States. And there will be a day where the Americans will realize that they were deceived by al-Maliki some time, and they will regret that.

(END VIDEO CLIP)

DAMON: And Wolf, I can tell you that that concern is also shared by many other Iraqi politicians. And it is also one concern that we have been hearing echoed throughout the streets of Baghdad -- Wolf.

BLITZER: I've been hearing all these reports that he's going around arresting Sunnis, just throwing them in jail. So far, as you've pointed out, no interior minister, no defense minister, he's keeping all these powers for himself.

Is that what a small "d" democrat is supposed to do in Iraq?

DAMON: Well, hypothetically speaking, no, of course, not. And that is why al-Mutlaq and other politicians are incredibly concerned.

They are accusing al-Maliki of trying to consolidate more and more power. Over the last few weeks, the Iraqi government has announced that it has detained hundreds of individuals that it claims are Ba'athists, are terrorists, but al-Mutlaq and other politicians say that those individuals, the vast majority of them, 90 percent of them, according to al-Mutlaq, are quite simply al-Maliki's political opponents. They say that he is on a sectarian campaign to try to consolidate more and more power, especially as the U.S. is gearing up to leave Iraq.

BLITZER: Arwa Damon's been in Iraq since the war started in March, 2003, and has done amazing reporting for us.

Arwa, thanks very much for all your good work.

As Vice President Joe Biden's top national security adviser, Tony Blinken is usually right in the thick of things over at the White House. Take a look at this photo. He's on the far right as the vice president met with Iraq's president.

As the war winds down this month, and the United States host the Iraqi prime minister, it's certainly a time of reckoning for so many people.

Tony Blinken is joining us now from the White House.

Tony, thanks very much for coming in.

Let me get your quick reaction to these words from the Iraqi deputy prime minister, Saleh al-Mutlaq -- I assume you know this individual --- that the president of the United States is leaving Iraq right now in the hands of, in his words, a dictator.

TONY BLINKEN, VICE PRESIDENT BIDEN'S NATIONAL SECURITY ADVISER: Wolf, it's good to be with you. Thanks for having me.

I know the deputy prime minister well, and I think this is really a reflection of a very important fact, which is that over the last couple of years, politics has broken out in Iraq. That remains the basic way of doing business, not violence, and that's a huge step forward.

And so you hear very strong statements by the deputy prime minister, by other political opponents of the prime minister. They're able to make those statements, they're able to engage in the political process.

Right now we have not only a very strong prime minister in Iraq, but a very strong speaker of the council of representatives, their parliament, who's from another party and indeed from another community. We have a Kurdish president.

We have a representative government that brings in all the communities. And despite these tensions that are reflected in the deputy prime minister's comments, again, the most important fact is that Iraqis are using a political process to settle their differences. That's the most important thing.

BLITZER: Why was the president yesterday, Tony, so effusive in his praise for Nouri al-Maliki, when so many Iraqis say this guy does not deserve praise like this from the United States of America?

BLINKEN: I think the president was effusive in his praise for the positive developments in Iraq.

BLITZER: No, he was also effusive in his praise personally for Nouri al-Maliki, for what he has done as prime minister of Iraq.

BLINKEN: Look, the prime minister has done many important, significant things, as well as some controversial things. But let's look at the whole record.

He took on the Shiite militia, who were attacking our forces and attacking Iraqis in the south in 2008. This summer, when we had an upsurge in violence against our diplomats and our troops again, coming from Shiite militia, this time in Masan (ph) Province, he took them on. And he sent a very strong message to Tehran that an attack on Americans would be considered an attack on Iraq and Iraqi sovereignty.

So there's a much broader record here that you have to look at. I don't have a brief for the prime minister or for any other political leader in Iraq. What we look at is not personalities, but the policies they pursue. And the fact is, all of these actors and leaders are working through the political system to advance their interests, and that's the most important thing.

BLITZER: It's hard to believe, though, Tony -- and you're a former official, you worked on the Senate Foreign Relations Committee -- that at a time when Bashar al-Assad in Syria has killed more than 5,000 people, mostly peaceful protesters, only Nouri al-Maliki, with the exception of Lebanon, has sided with Iran in supporting the Syrian regime of Bashar al-Assad.

Is this why the U.S. went to war, to create a prime minister of Iraq who would side with Bashar al-Assad in the face of these atrocities?

BLINKEN: I don't think the prime minister's siding with Assad. Indeed, the president and prime minister had a very detailed conversation about Syria yesterday. From the Iraqi perspective --

BLITZER: He has rejected the Arab League's sanctions. Almost all of the other Arab countries want to impose sanctions on Syria, not Iraq.

BLINKEN: So the case the Iraqis make and the prime minister makes is they suffered under sanctions, so they know what that's like. And they also are concerned about what would follow Assad and they're concerned about what they call --

BLITZER: You buy that?

BLINKEN: No. And the case that the president made to the prime minister is the single greatest cause of instability right now in Syria, the person who actually threatens a sectarian conflict that spills over into Iraq, is Bashar al-Assad. And until he stops killing his people and until there's a chance in governance in Syria, the threat of a sectarian conflict is real. And we made that case very strongly to the Iraqis. I think they are outliers right now, but they have real concerns.

BLITZER: Is it your sense -- and I know you've studied the situation very, very closely in Syria -- right now that the return of the United States ambassador to Damascus sends the wrong signal to everyone out there that it's almost going to be business as usual between the United States and Syria? Why not sever diplomatic relations and keep Ambassador Ford here in the United States?

BLINKEN: I think anyone who has followed what Ambassador Ford has done while he's been in Damascus, when he was there on the first part of his tour, would know that he's played a very important role in drawing the world's attention, drawing the region's attention to the abysmal actions of the Assad government, and really put a light on the people who are suffering. That was a very important role, it continues to be an important role, and it's a good thing that he's going back there.

BLITZER: So, if the other Arab countries start withdrawing their ambassadors, the U.S. will still maintain an embassy and keep the ambassador in Damascus?

BLINKEN: I'm not going to speculate on what we might do. It's a hypothetical situation going forward. The main thing is that there is a very strong and growing consensus that the -- of course the violence has to stop immediately, and the only way we're going to see a positive change in Syria is if Assad leaves power.

BLITZER: One final question on Iraq, and it's a sensitive subject. There's a Hezbollah terrorist named Daqduq who is the last remaining detainee of the U.S. military in Iraq. He's Lebanese, Hezbollah, supported by Iran.

What are you going to do with Mr. Daqduq?

BLINKEN: This is someone who has American blood on his hands. We are in very close consultations with the Iraqi government to make sure that he sees justice in a way that meets the requirements of our law and Iraqi law. And we are determined that that happens. This was discussed during the prime minister's visit, and we're very focused on this.

Let me just add, Wolf, that, for all of these difficulties and all of these challenges -- and Iraq still has many of them -- this is a very important week and a very important moment. The president made a commitment that he would end the war in Iraq responsibly. We started with 150,000 Americans in Iraq when we took office. By the end of this month, they will be home.

That's a tremendous achievement. It's a promise made and a promise kept. And I think that's the big picture.

And meanwhile, politics has emerged in Iraq, and we're developing a strong, comprehensive relationship with them. So it's important to keep sight of that big picture even as we grapple with these very, very difficult problems. BLITZER: Can you assure, Tony, the families of those five American soldiers who were killed by Daqduq, murdered by Daqduq, that he will not be allowed to leave Iraq and go to Iran, where he will be free, that the Iraqi government, if you leave him there -- I'm not sure why you would even leave him there. Why can't you just take him with U.S. troops and bring him back to the United States or Guantanamo? He killed five American soldiers.

BLINKEN: I can assure those families and every American that we will do everything we can to make sure that he sees justice.

BLITZER: Just explain why you can't take him out of Iraq and bring him to Guantanamo or some prison, Fort Leavenworth, for example, or Fort Bragg.

BLINKEN: One of the things that our men and women in uniform fought for was for Iraq to emerge as a sovereign country. We can't take simply someone out of the country without their agreement.

So we're talking to them right now about what to do with this person in a manner that's consistent with our law and with their law. It's very important that we uphold the rule of law here and, of course, in Iraq. But we're very focused on making sure that he sees justice.

BLITZER: What would be the message sent if the Iraqi government rejects that U.S. request that you take him out of Iraq?

BLINKEN: Look, again, that's -- right now that's a hypothetical situation. We're working very closely with them to make sure that he does not see the light of day.

BLITZER: Tony Blinken is the national security adviser for the vice president, Joe Biden, who was just there.

I know you were there with him, Tony. Thanks very much.

BLINKEN: Thanks, Wolf.

BLITZER: You guys have got a tough job over there, and we're hoping and praying for the best, because God knows the U.S. has invested so much blood and treasure in liberating Iraq and, at times, I get the impression -- I don't know about you -- that they seem so ungrateful to the United States. But that's just me. And I've written about it, and we can discuss more in the coming days.

Thanks very much, Tony.

BLINKEN: Thanks for having me, Wolf.

BLITZER: Nothing is more top secret than the identities of U.S. agents overseas. That's why U.S. officials are so concerned right now about a defiant statement from what they call a terrorist group in the Middle East. We're going to tell you what the group is claiming.

(COMMERCIAL BREAK) BLITZER: Now to a new blow in America's spy operations in the Middle East. The militant group Hezbollah claims it has exposed the identities of 10 CIA officers.

Brian Todd is looking into the story for us.

What are you finding out?

BRIAN TODD, CNN CORRESPONDENT: Wolf, some experts we spoke with, including a former CIA officer, believe this is a full-fledged covert war with Hezbollah that the U.S. is engaged in right now, and by extension with Iran. Now, if Hezbollah's latest claims are true, the group which the U.S. calls a terrorist organization may have just made a damaging strike against American intelligence in a very crucial place.

(BEGIN VIDEOTAPE)

TODD (voice-over): With polished graphics, silhouetted images, and ominous music, Hezbollah ratchets up its covert war with the U.S. In a broadcast on the Lebanese network Al-Manar, Hezbollah reveals the names of 10n people who it says were CIA officers working at the U.S. Embassy in Beirut in recent years. It includes the name and date of birth of someone it says is the CIA station chief. CNN is not airing that name.

The CIA would not confirm or deny if the video is accurate. A spokeswoman said, "The agency does not, as a rule, address spurious claims from terrorist groups. I think it's worth remembering that Hezbollah is a dangerous organization with Al-Manar as its propaganda arm. That fact alone should cast some doubt on the credibility of the group's claims."

Bob Baer is a former CIA officer who served in Beirut, was involved in operations targeting Hezbollah. I asked him if he found the claims credible.

ROBERT BAER, FMR. CIA OFFICER: I assume it's correct. I think I understand how Hezbollah compromised the CIA there. They used a telephone link analysis. So, once you tie one phone in to another phone, you can pretty well identify a station.

TODD: In the video, Hezbollah even produces animations, recreating meetings it claims occurred at places like McDonald's and Pizza Hut between CIA agents and their recruits.

(on camera): None of that can be verified, but Baer says Hezbollalh has eyes and ears all over Beirut, from the area near the U.S. Embassy, to the airport, the Defense Ministry, and to parliament, where the group holds seats.

(voice-over): These new claims come after Hezbollah partially unraveled the CIA's operations in Lebanon, capturing some informants. Hezbollah has been a bitter enemy of the CIA since the 1980s, blamed for bombing the U.S. Embassy and the kidnap and murder of CIA officer William Buckley. U.S. officials say the group gets weapons, training and money from Iran. Reuel Gerecht is a former CIA officer who tracked Iran's operations in Europe and the Middle East.

(on camera): Who do you think has the upper hand right now in the covert operations side between the U.S. and Iran?

REUEL GERECHT, FOUNDATION FOR DEFENSE OF DEMOCRACIES: Well, I mean, I think Iranians really always have the upper hand in any type of covert engagement, because they do it all the time. The Iranians have a very active covert paramilitary program, the Quds force of the Revolutionary Guard Corps. It really does go around the world and kill people.

(END VIDEOTAPE)

TODD: Now, on Hezbollah, one U.S. official who also did not deny Hezbollah's claims to identify American intelligence officers said, "Repeating Hezbollah's claims does nothing but serve that group's interest, making things harder for things for Americans in Beirut." This official said no one is giving up against Hezbollah. This official points out that group has killed more Americans than any other terrorist group except al Qaeda.

Wolf, if these claims are true, very, very damaging to U.S. intelligence in Lebanon at a very crucial time and a very crucial place.

BLITZER: All right. You'll stay on top of this story for us, Brian. Thank you.

A single photo captures the terror of the war in Afghanistan.

(COMMERCIAL BREAK)

BLITZER: Let's go to Jack. He's got "The Cafferty File" -- Jack.

CAFFERTY: The question is: What do you fear most: big government, big business, or big labor? A Gallup poll indicates more Americans are afraid of big government, one point below an all-time record high in this country.

Deb in Montana, "Let's see. Big labor's been in a steady decline for decades, roughly paralleled by the decline of the middle class, but that's a story you probably won't cover. And big government can be voted out of office, or battled through the courts, or through the initiative process in many states, so at least we have some limited remedy provided by our Constitution."

"That leaves big business. Today's unfettered, laissez-faire capitalism, where the bottom line reigns supreme at the cost of a decent middle class life as jobs are sent overseas by the millions for health of the bottom line. Big business has us all by the throat, and I don't know what to do about that."

David, in California, "If you look at Russia and the Eastern Bloc, Greece, Spain, Portugal, Venezuela, and most other fallen societies throughout history, ,it wasn't big business that brought them down. Big government, with the help of big unions, has always the cause."

Rob in Salt Lake City writes, "All of the above. Too much centralization of power is the plague of this century, but big government, first and foremost. A blow to government does many things, none of them well. It becomes a tool utilized for transferring wealth and causing division, dissension and ultimately destruction."

Pat writes, "I worked for a union for 30 years. They protected me on the rare occasion when I had a boss with an ax to grind with no real reason."

"I paid my dues. I did my job. Big business provides a product for a price and they usually deliver. You'll always have some who see evil in big business."

"Big government, on the other hand, has had its nose in my bedroom, living room, and wallet since the day I was born. I will decide if I smoke pot or cigars, drink champagne or drain cleaner, and want to marry the girl next door -- or her brother."

If you want to read more about this, go to my blog, CNN.com/caffertyfile, or through our post on THE SITUATION ROOM'S Facebook page -- Wolf.

BLITZER: Thanks, Jack.

Jeanne Moos is next.

(COMMERCIAL BREAK)

BLITZER: Nick Nolte says he wants to clear up the truth about an episode that may be a little foggy.

Here's CNN's Jeanne Moos.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): It is the Mona Lisa of mug shots enshrined on T-shirts. So famous, all it takes to recognize it is the outline.

Ridiculed in song --

(MUSIC)

MOOS: -- imitated --

UNIDENTIFIED MALE: Put your hands like this, Nick.

MOOS: -- worn as Halloween costume, as seen here in "People." Someone even put it on his credit card.

Almost a decade after its release, Letterman is still making jokes about Nick Nolte like the one about how the U.S. didn't release a death photo of Bin Laden --

DAVID LETTERMAN, HOST, "LATE NIGHT WITH DAVID LETTERMAN": Right? They didn't release any pictures. So the White House released this instead. Take a look at that.

MOOS (on camera): But now Nolte is talking, and he's saying a mug shot it was not.

(voice-over): In an interview with "GQ" magazine, Nolte explains he was high on a drug called GHB, Liquid Ecstasy, when he swerved off the Pacific Coast Highway. "At the hospital Nolte was taken for a blood test, a young officer asked him if he could take a Polaroid. 'I said, 'Come on. You don't really want to ask that, do you?' Nolte recalls. But he did."

"Nolte made him agree that, if he posed, the young officer would share any proceeds with his colleagues. 'And I let him shoot the Polaroid.'"

The rest is history. It's the gold standard against which mothers compare their baby's hair.

STEPHEN COLBERT, "THE COLBERT REPORT": He was 1992's "Sexiest Man." And look at him now -- still sexy.

MOOS: One guy posted that on his local TV weather forecast, "When we are expecting heavy wind, this picture of Nolte is what they used for bad hair day."

But police may be tearing out their hair, because the California Highway Patrol spokesman who originally released this picture says it is a mug shot, one of several that they took, not a Polaroid taken at the hospital.

ANDREW GOLDBERG, TSG MANAGING EDITOR: Maybe that's how he perceived it on GHB, that maybe they were saying, please stand there for this picture, and he thought, here's another fan who wants a picture. Maybe that's one of the things that GHB does to you.

MOOS (on camera): It makes you think everybody's a fan.

GOLDBERG: Everybody's a fan. Who doesn't want my picture?

MOOS (voice-over): Mel Gibson has reportedly said that he made sure his hair was groomed in his mug shot so he wouldn't end up like Nolte.

(on camera): The moral of the mug shot, or whatever it was, comb your hair.

(voice-over): But even if this kid didn't, at least he wasn't wearing a Hawaiian shirt.